New York, NY – Today, The Clearing House welcomed the International Swaps and Derivatives Association’s (ISDA) announcement that large global banks with significant cross-border trading activities have voluntarily agreed to implement contractual changes that, in a resolution context, will provide for temporary restrictions (or stays) on early termination rights of derivatives counterparties. These contractual changes are contained in a new protocol that the industry developed through ISDA.

“This is a huge step forward. Voluntary adoption of the ISDA protocol further demonstrates the industry’s commitment to ensuring that even the largest global banks can be resolved in an orderly way without cost to taxpayers,” said Paul Saltzman, President of The Clearing House Association.

Of particular importance for globally active U.S. banks, the contractual stay provisions will apply both to an ordinary bankruptcy proceeding under Title I of the Dodd-Frank Act, as well as to a special resolution conducted under Title II’s Orderly Liquidation Authority. By including bankruptcy proceedings under Title I, the ISDA protocol, once fully adopted, will resolve one of the few remaining key concerns raised by regulators and policymakers about living will plans – namely, that early termination by derivatives counterparties could disrupt an otherwise orderly recapitalization-based bankruptcy. The stay ensures that that there is sufficient time for a troubled firm to restore itself to health, without subjecting the firm to potentially destabilizing capital and liquidity pressures associated with early terminations.

On this issue, Saltzman continued, “There is broad consensus that adoption of the ISDA protocol effectively addresses one of the primary impediments to orderly resolution recently identified by regulators in the living will plans.”

About The Clearing House Established in 1853, The Clearing House is the oldest banking association and payments company in the United States. It is owned by the world’s largest commercial banks, which hold more than half of all U.S. deposits. The Clearing House Association L.L.C. is a nonpartisan advocacy organization representing—through regulatory comment letters, amicus briefs and white papers—the interests of its owner banks on a variety of important banking issues. Its affiliate, The Clearing House Payments Company L.L.C., provides payment, clearing and settlement services to its member banks and other financial institutions, clearing almost $2 trillion daily, which represents nearly half of the automated clearing-house, funds transfer, and check-image payments made in the United States. See The Clearing House’s web page at www.theclearinghouse.org.